Impact of Agricultural Financing Mechanisms on Agricultural Output in Nigeria: Evidence from ARDL Modelling (2009–2023)
Impact of Agricultural Financing Mechanisms on Agricultural Output in Nigeria: Evidence from ARDL Modelling (2009–2023)

Summary/Abstract: The relationship between agricultural financing and agricultural output in Nigeria was investigated to provide empirical insights into the efficacy of funding mechanisms in driving agricultural productivity. Government expenditure on agriculture (GOVXA), commercial bank loans to agriculture (CBLA), and disbursements under the Agricultural Credit Guarantee Scheme Fund (ACGSF) were employed as proxies for agricultural financing, while agricultural gross domestic product (AGDP) served as a proxy for agricultural output. Using quarterly data spanning from the first quarter of 2009 to the fourth quarter of 2023, the Autoregressive Distributed Lag (ARDL) model was estimated to capture both the short-run and long-run dynamics of the relationship. The analysis was conducted using EViews 9.0. The empirical findings revealed that among the financing instruments, only CBLA exerted a statistically significant and positive effect on agricultural output in both the short and long term. In contrast, neither GOVXA nor the ACGSF disbursements exhibited a significant impact on agricultural productivity during the study period. Furthermore, the inclusion of annual rainfall as a control variable indicated a robust positive effect on agricultural output, underscoring the sensitivity of Nigerian agriculture to climatic conditions. These findings suggest that while multiple funding mechanisms exist, the effectiveness of such instruments varies considerably. It is implied that the institutional efficiency and direct credit channeling associated with commercial bank lending may render it more impactful compared to broader fiscal allocations or credit guarantee schemes, which often suffer from bureaucratic inefficiencies and implementation gaps. Policy recommendations include the expansion of commercial bank lending to the agricultural sector, alongside strengthened regulatory oversight to ensure the proper utilisation of funds for productive agricultural activities. Furthermore, improvements in credit delivery mechanisms under government schemes are essential to enhance their effectiveness. A more climate-resilient approach to agricultural policy is also advocated, given the significant influence of rainfall variability on output levels.

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